Mutual fund companies repeatedly commit cardinal sins when it comes to marketing their products, says a mutual fund industry marketing consultant. And it doesn't look like that will change anytime soon.
The companies find performance-based advertising too alluring, says Ann Becker, president of Thompson Becker International. And they too often fail to resist the temptation to drastically alter their marketing campaigns, she said.
"Performance alone is fleeting," Becker said. "You really have to sell your expertise, you sell your knowledge, your service, you sell your longevity."
Becker, who addressed the issue late last month at a Boston conference about mutual fund supermarkets hosted by the Institute for International Research, says companies with funds in the top quartile of Lipper rankings typically disappear from that bracket within three years. Still, companies return time and again to performance-based marketing, she said, because "numbers are always just too tempting."
Historically, some 90% of mutual fund companies have boasted their stellar performance in print, TV and Web advertising, Becker said. She estimates that number has declined to between 60 and 70% because market declines have left many companies with little to brag about.
But she is not confident that that will be the case for long. Whenever markets begin to climb again, Becker fears companies will return to their old habits. "We're going to be watching very closely," she said. "It will be very interesting to see if any lessons have been learned."
Tout On, Tout Off
Becker said performance advertising presents a particularly grave danger for companies that use the method too frequently. For years those companies will laud their gains--and consumers will begin to recognize the advertising whenever they flip open, say, the Wall Street Journal. Then, those funds decline, she said, and companies feel inclined to change strategies, to tout sound management or longevity. Consumers notice. And they wonder, "What happened?" Becker said.
Still, she said, not all performance advertising goes awry. "Performance is not terrible. "But it has to be performance in a message that will survive longer term. You can't be going out with a different message every time. It will never register. The secret is repetition. By the time you're bored with it, the audience will have gotten it."
Don't Get Bored
All too often fund companies become bored with their message too quickly, she said. They are easily wooed into fresh campaigns by hyper-creative advertising teams seeking to show off. Or, they are blown off course by top executives who join the ranks and want to make their mark with new marketing.
To that, Becker says an advertising campaign is like a child who, in order to become an adult, must think about what she wants to be when she grows up. Campaigns must be planned for the long-term, Becker said, from infancy to old age.
An example of what not to do involves a well-known Charles Schwab campaign where celebrities such as Ringo Starr spout financial industry jargon during jam sessions or whatever their natural environment might be, she said.
"That was a great campaign," Becker said. People remembered it. But it has dropped from sight, she said. Schwab may revive the campaign for all Becker knows, but it disappeared from the public eye long before its full purpose was served.
The campaign was switched to more demure advertising showing Charles Schwab himself discussing the markets. Becker suspects the change is an effort "to build trust in the marketplace" and demonstrate that "there's somebody on the other end of this electronic mechanism that [Schwab has] become best known for."
Schwab should have kept the original celebrity theme and, perhaps, thrown Charles Schwab into the mix, altering the campaign slightly, Becker said, while still delivering the timely message the company wanted to communicate.
But will fund companies shake this attention deficit disorder in their campaigns anytime soon? Becker sees hope in the likes of T. Rowe Price and Vanguard, companies that have maintained such consistency in their marketing. Other companies, however, are slow to catch on.
"I think they have a long way to go," Becker said.